In his recent article about Facebook, Instagram and the future of photos, Ad Age’s David Teicher remarks that “there’s more to photo innovation than filters.” Now that we’re taking all these pictures on our phones and sharing them across our social networks, what’s next? Adding functionality that will turn each photo into rich consumer experience, he says.

David interviewed me for the article, and asked me why images aren’t more interactive already:

Luminate CRO, Chas Edwards, notes a few obstacles to making this vision a reality. First is the work that goes into it. Right now, these services either rely on people-powered tagging, image recognition, or both, but the ability to scale this functionality — to make it easy for people to accurately tag the products or outfits in photos, were they so inclined, is not an easy endeavor. Secondly, there’s a reason people tag other people — they get paid, not in money, but in social currency, through ‘likes’ and ‘shares.’

Facebook is the leader when it comes to paying us in social currency for tagging images: There’s no better way to increase your “Like” counts than tagging others in the picture. But there isn’t a similar reward for tagging things in the image other than your friends, and Facebook’s brand tagging product hasn’t experienced popularity anywhere near that of friend tagging.

A few new startups (such as ThingLink) are hoping publishers will start tagging products and brands inside their own images. It’s still early days, but my hunch is that publishers don’t have the spare cycles necessary to add image-tagging to their queues, especially when you consider the enormous (and growing) volume of images posted each day by large publishers. Our bet here at Luminate is that publishers want (need?) to give their readers a richer image experience, but that we need to help them with the tagging. Image recognition gets us part of the way. Human assistance — communities of people working on top of crowdsourcing platforms — gets us the rest of way. Once we know who, what and where we’re looking at, we can deliver image apps that make a photo more delightful for almost anyone.

I sat down with Digiday’s Brian Morrissey on Tuesday to talk about social advertising, native creative formats, the GM-Facebook dustup, and the future of advertising around images. Excerpts below. Full story here.

Brian: GM is pulling its Facebook ad budget because it says advertising there doesn’t work. What do you think?

Chas: That’s a preposterous claim. I can’t imagine the first year that GM was buying TV commercials it was able to ascertain what was working and what wasn’t. It’s taken a generation to perfect and understand how to measure success in TV. For it to do that after three years seems premature to say it works or doesn’t work as a global statement. Facebook as a consumer experience and an advertising platform are both relatively new.

Brian: Why do you think images need a native format?

Chas: Right now… everyone is getting hip to images in a bigger way. Publishers are coming clean and saying 60 percent of their page views are image galleries. We’re seeing that in the growth of Pinterest and the acquisition of Instagram. It’s giving everyone permission to say images matter. There are a variety of companies saying images are yet another piece of real estate we can slap ads on…. There’s no content, just ads. We [at Luminate] are trying to do something different. If we can create applications that augment the image experience with content and services, then publishers and users will like the experience, and then we can think of the ad experience that’s native to that experience.

In the Kodak Era we took pictures on birthdays and vacations. Now, with a camera in nearly everyone’s pocket — there were 2.5 billion camera phones in use in 2009 — there is a whole new dynamic around image content. You can break down this new dynamic into three phases.

Phase I
We’re witnessing a massive increase in photo creation: Ten percent of the photos every taken by humankind were taken in the past 12 months (source).

Phase II
New platforms for sharing those images (especially Facebook, Instagram and Tumblr) have turned photos into the universal language for communicating in social media.

Phase III
New technologies are turning those static images into interactive experiences. The popularity of Pinterest, from anonymity to the third largest social network in a few short months, is one example. Luminate’s image apps, which are used by more than 100 million consumers, are another.

Battelle kicked off the annual Conversational Marketing Summit by interviewing Barry Diller, who delighted the CM Summit’s digital-evangelist crowd with remarks such as “magazines like Newsweek won’t survive another five years as print publications.” Then he summed up the divide between the big media companies and Silicon Valley as follows: “Talking to a TV network exec about tech is like talking to a plumber about bio-physics.” But tech adoption aside, he said, the cable and broadcast networks beat the pants off the internet when it comes to reliably delivering high-quality content, which is one of the chief reasons that advertisers love to spend on TV.

FM’s Joe Frydl presented the Law of Content on the Web: “The value of content on web is directly proportional to number of connections is starts or sustains.” Where digital marketing goes wrong, he said, is that — for all the targeting tools — it doesn’t understand context, and as a result it’s “tone deaf.”

LUMA Partners’s Terence Kawaja blinded the audience with a handful of new LUMAScapes, those logo mosaics that show the complicated ecosystem of startups, agencies, networks and exchanges all fighting for parts of the digital advertising dollar, and proposed a standard OS for online advertising. From Ki Mae Heussner’s post on GigaOM:

While the industry wouldn’t want to quash the innovation, he floated the idea of addressing what he called the ‘rationalization’ issue through standardization. Just like mobile technology has its Android and iOS platforms, Kawaja said, digital advertising could have its own operating system. “Many other industries have benefited greatly by having an operating system, a common platform upon which other companies can build their tools,” he said.

“Too many brands still think writing a big check to Facebook means you have a social strategy,” quipped Mediavest digital chief Amanda Richmond. Meanwhile, on Tuesday, news broke that one of her agency’s biggest clients, GM, has canceled its $10 million ad contract with Facebook, three days before the social network’s IPO. The big-check-to-Facebook strategy isn’t working for GM, apparently. (To which I say, that’s preposterous.)

The industry loves data (“consumer insights are the new black,” she said), and the ability to precisely target consumers based on that data. But while we’ve become good at precision ad delivery, “we also need to know what story to tell them.” We’re falling short on the creative side. (Related: Digiday polls some industry folks, including me, to ruminate on the flaws and virtues of the banner ad.)

And then from Luminate’s Bob Lisbonne (my boss): Welcome to the Imagesphere. In the Kodak Era we took pictures on birthdays and vacations. Now, with a camera in nearly everyone’s pocket there is a whole new dynamic around image content. Ten percent of the photos every taken by humankind were taken in the past 12 months (1000Memories). That’s Phase I of the Kodak-to-Imagephere migration: A massive increase on photo creation. Phase II: New platforms for sharing those images (especially Facebook, Instagram and Tumblr) have turned photos into the universal language for communicating in social media. What’s next? Phase III, Bob argued, will turn those static images into interactive experiences. The popularity of Pinterest, from anonymity to the third largest social network in a few short months, is one example. Luminate’s image apps, which are used by more than 100 million consumers, are another.

Sarah Bernard, social media director for the White House, seemed to support Bob’s theory that images are where it’s at. When asked what she’s learned from using social media for direct democracy, she joked that the best way to engage the citizenry about tax code would be to sneak in some fiscal policy on a photoblog dedicated to Bo the dog.

Earlier this week Forbes reported a massive drop Washington Post readers who accessed the site via Facebook’s Social Reader tool — from 17.4 million average monthly users in April to 9.2 million in May.

Debobrah Petersen, social media editor at the San Jose Mercury News, speculated on the reason for the drop. The idea of alerting Facebook friends to every news article you read “makes me obsess about whether I look smart enough, and it threatens to strip me of my guilty pleasures. Worse yet, I could appear un-cool or downright boring.”

I do think she’s on to something, especially the comment about guilty pleasures. When my Newsfeed is flooded with Washington Post and Yahoo News articles that my friends are reading, I’m generally annoyed by the spamminess of it all. Except when one of those friends is reading an article about tantric sex tips or something else that hits my feed like an intriguing, if accidental, confession. (My 60-something relative turned off her Social Reader shortly after the above incident.)

But from John Herrman’s analysis at Buzzfeed, it sounds like the usage collapse at WashPo — and similar ones at The Gaurdian, DailyMotion, Scribd and others — isn’t mainly the result of embarrassed, over-sharing readers calling it quits. Rather its because Facebook tweaked the algorithm that controls how often articles read via Social Readers are presented to other Facebook members. “Facebook giveth and Facebook taketh away,” as GigaOM’s Mathew Ingram put it; it’s “very much a Faustian bargain.”

True enough. Sort of like the Faustian bargain every publisher with an iPad app makes with Apple, or any web publisher or online retailer makes with Google (even if they don’t realize, until traffic plummets, that they made a deal with the PageRank algorithm). Then again, this isn’t entirely different from the deal made by a TV programmer with the network that distributes its show, right? You can fill up your mom’s basement with reels of your awesome new police drama, or you can cut a deal with a network to put them in front of an audience.

I’m sure last week was a miserable one in the PR department at Washington Post. But after losing 8 million monthly readers, they still have 9 million that they didn’t have before launching the Social Reader.

Above is the first paid banner ad, which ran on Hotwired in 1994 and delivered a 78% click-through rate. That’s about 1000 times the average CTR on display banners in 2012, even though today’s ad units are bigger, better targeted and more animated. An illustration, apparently, of what Andrew Chen has dubbed the law of shitty clickthroughs. Put simply: “Over time, all marketing strategies result in shitty clickthrough rates.”

Without a doubt, one of the key drivers of engagement for marketing is that customers respond to novelty. When HotWired showed banner ads for the first time in history, people clicked just to check out the experience. Same for being the first web product to email people invites to a website — it works for a while, until your customers get used to the effect, and start ignoring it.

We’ve all seen the Jakob Nielsen eye-tracker studies where our eyes literally avoid looking at the banners, and this would seem to support Chen’s premise: Now that we know those boxes over there are ads and they’ve lost their novelty, we’ve learned to ignore them.

I think that’s a lazy interpretation of the data, though. The novelty of a 30-second commercial break on TV wore off before I was born, and while some of us are certainly skipping them some of the time, they continue to perform very well when people actually watch them. Novelty has nothing to do with it. When commercials deliver compelling content, we watch them, we talk about them at the water cooler, and then we got to YouTube to watch them again.

I’d argue that banner-ad viewership, engagement and click-through rates continue to fall not because there’s something fundamentally broken about a 300×250-pixel rectangle on a web page; consumers have stopped paying attention because we tend to fill up that rectangle with crap. When I see a commercial that I love and want to share with my friends, I’m not sharing an ad — I’m sharing content that a brand produced. Content that taught me something or made me laugh or plucked my heart strings. When brands start to do a better job at delivering content inside banners and Sponsored Stories and Promoted Tweets, consumers won’t care that they’re ads — they’ll look at them anyway.

Google is changing the look-and-feel and the label they put on an ad product they used to call “comparison ads.” Now Google would like us to consider them a “third kind of thing” — not quite organic results, and not quite ads. From Search Engine Land:

Google has had what it has called ‘comparison ads’ for some time, but these comparison units are getting a new look in Google’s search results beginning today. Google hopes the change will better explain to searchers that comparison listings come from companies it has a commercial relationship with. It also highlights how three Google search products now seem to largely operate on a paid inclusion basis. Google was once a vocal opponent to paid inclusion programs…. In the new format, the background color that’s used for Google’s traditional AdWords units is gone. The comparison units also carry a ‘Sponsored’ disclaimer rather than an ‘Ads’ one, as with AdWords ads. This seems part of Google’s positioning the new units as something different than ads.

Brazilian ad agency GrupoFourMidia is putting taste-based advertising on the parking receipts you buy at a kiosk and then place on your dashboard. From Springwise:

GrupoFourMidio observed that once drivers buy a parking ticket they often place it in their mouths while looking for a space. By infusing the tickets with an aroma or flavor related to the product advertised on the reverse, the scheme enables brands to immediately catch potential customers’ attention and draw their eyes towards the printed advertisment on the ticket.

I don’t know about this one. Sure, we might put dirty, inky strips of paper in our mouths as we reach in our pockets for car keys, but I’m guessing most of us consider it a bad habit. More likely, we don’t consider it all — we do it without thinking, like biting our nails. Is this sponsored, chemical-created flavor going to create desire for a tasty product, or associate the sponsor’s brand with a gross little thing we did as we recover from the annoyance of hunting for a legal parking spot?